HMRC Enquiries: Bedouin/Redstone

[jbryce]

Glib

How certain are you about this? EBT schemes also had loan contracts so I really don't see the difference. EBT users also have a legal obligation to repay the loans granted to them. The argument presented by HMRC is that the loans are artificial, are not - in reality - repayable, and therefore taxable as income. I'd be stunned if HMRC agreed with your distinction, especially as interest is rolled up and never paid. Hate to be the bearer of bad news and all that, but there it is .

It really is not as simple as that. HMRC are using ToAA to go after EBTs they are backing away from the loan argument (they don't think they need it), if you appear before an FTT it will be ToAA they will try and nail you with.

Commercial loans are a totally different beast from the loans we received in an EBT. Further, don't assume that EBTs, or any of these other vehicles, are not effective avoidance - in some cases they are - and may well win in a court of law. As for rolling up interest that's not relevant to the avoidance issue.

The Rangers case is a good example of a case that HMRC claimed they would win, before losing twice in court. Just because HMRC say something is ineffective does not mean it is a failed scheme.

None of this is 'easy', a lot of the law is tricky. HMRC do not want to drag every scheme through court - they may win their fabled 80% - but they may lose against some of the more robust schemes. The problem is to run a robust effective scheme requires cost and legal investment something not all of the schemes we see in the headlights on this forum here bothered to do.
For example AML are fighting their case - they haven't cut and run. Other providers have bailed.

[DonkeyRhubarb]

Also bear in mind that HMRC wouldn't have introduced the disguised remuneration legislation in Dec 2010 if the law was already firmly on their side.

Clearly they thought the law was deficient otherwise they wouldn't have asked Parliament to legislate.

The Rangers case is a perfect illustration of that deficiency.

[jbryce]

Also bear in mind that HMRC wouldn't have introduced the disguised remuneration legislation in Dec 2010 if the law was already firmly on their side.

Clearly they thought the law was deficient otherwise they wouldn't have asked Parliament to legislate.

The Rangers case is a perfect illustration of that deficiency.

.....and they introduced the GAAR in 2013 because some schemes managed to avoid the disguised remuneration legislation. Post 2013, the GAAR, in theory, effectively kills schemes - although HMRC haven't used it.

It's hard stuff - hence lawyers. And for them you need a group.

[DonkeyRhubarb]

It's hard stuff - hence lawyers. And for them you need a group.

Yes that's exactly what we're doing. We've got about 500 members and most have committed to throwing in a few hundred quid to hire a decent QC for an FTT case.

If you think about it, it's a no brainer. What's a few hundred quid compared to a 5 or 6-figure tax bill?

[StrengthInNumbers]

HMRC is going to have a big egg on its face. They can and will threaten now and get the money collected but how will they prove that EBT is non avoidance in UK but avoidance regulation of ToAA will be applied when used aboard. No benefit here in transferring asset aboard even if you agree with HMRC that asset was transferred, when EBT was legal in UK.

[Boobetty]

Thanks for your comments JB and DR. I am in agreement with you concerning the ToAA challenge against offshore EBT's but that is really beside the point I was trying to make.

The post I was challenging was, in my opinion, being unduly optimistic about HMRC's attitude towards commercial loan arrangements. EBTs tended to loan interest free, thereby attracting a benefit in kind. Commercial loan arrangements were interest bearing but the interest was rolled up. Either way nothing was repaid, interest nor capital, and both arrangements had loan agreements that could be enforced by law. If I put on my HMRC hat and consider the facts of these two arrangements using HMRC's usual scattergun approach then I am sorry but I don't think HMRC will agree with the distinction that some people are making.

In other words, to state that HMRC categorically will not go after commercial loan arrangements is foolhardy. They are still chasing a (presumably) lost cause like Rangers so why stop there.

[DonkeyRhubarb]

In other words, to state that HMRC categorically will not go after commercial loan arrangements is foolhardy. They are still chasing a (presumably) lost cause like Rangers so why stop there.

Agreed. They will attack most schemes on principle, even if their chances of success are poor.

[jbryce]

Thanks for your comments JB and DR. I am in agreement with you concerning the ToAA challenge against offshore EBT's but that is really beside the point I was trying to make.

The post I was challenging was, in my opinion, being unduly optimistic about HMRC's attitude towards commercial loan arrangements. EBTs tended to loan interest free, thereby attracting a benefit in kind. Commercial loan arrangements were interest bearing but the interest was rolled up. Either way nothing was repaid, interest nor capital, and both arrangements had loan agreements that could be enforced by law. If I put on my HMRC hat and consider the facts of these two arrangements using HMRC's usual scattergun approach then I am sorry but I don't think HMRC will agree with the distinction that some people are making.

In other words, to state that HMRC categorically will not go after commercial loan arrangements is foolhardy. They are still chasing a (presumably) lost cause like Rangers so why stop there.

Oh, I agree 100%, they'll def go after them and they'll scare some ninnies into paying. They're never going to give up on Rangers, and, even if they lose, they still have ToAA.
Some of the new schemes may skip past ToAA and may even have won in court, but uh-oh - here comes the GAAR that will rule that they're avoidance ->APN.
Some of the new schemes don't need to be notified under DOTAS because of grandfathering - again probably true, but uh-oh the law's changing to disallow that. DOTAS->APN.

PS sorry if I sounded preach-y in my earlier post - not intended.....

[StrengthInNumbers]

With ToAA argument HMRC is walking on very thin ice. We will see soon as the cases progress to courts. HMRC can delay but cannot stop.

[pinemartin]

Hi, I've just found this forum and reading these posts with interest. I have to complete a self assessment for 2013/2014. Having used bedouin/redstone for 5 months of that period do I need to worry? Have been advised to only declare what's on P60 by two accountants. Obviously there were expenses and 'loans' received.